As Congress begins to debate tax reform in the coming months, there is
one tax that they should pay close attention to: the capital gains tax.
The capital gains tax is a tax on profit through the sale of property or
investments. At the beginning of this year, the top marginal statutory
capital gains tax rate was increased to 23.8% from 15%.
Although lower than the tax on ordinary income, states also tax capital
gains, some of them as high as 13.3%, adding an additional tax
burden to savers and investors. Some taxpayers could pay up to a 33% tax on capital gains, a rate that far exceeds rates throughout
the world. This high tax rate has long-term negative implications for
the economy as people save and invest less and capital seeks higher
returns in other countries.